Note 7 - Debt

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 7 – Debt

East West Bank Revolving Credit Facility

On August 10, 2017, the Company entered into a Loan and Security Agreement, as amended, with East West Bank (the "2017 Amended Credit Agreement" or "Credit Facility"). The 2017 Amended Credit Agreement originally allowed us to borrow up to 85% of our eligible receivables and up to 85% of the appraised value of our eligible equipment. The Fifth Amendment to the 2017 Amended Credit Agreement dated September 23, 2020 (the "Fifth Amendment") restructured the loan and provided for a loan forgiveness of $16.0 million and converts the remaining principal balance to a $17.0 million equipment term loan and a revolver to provide the Company with a maximum $1.0 million line of credit. The Sixth Amendment to the 2017 Amended Credit Agreement dated February 1, 2021 (the "Sixth Amendment") further extended the maturity date and modified the financial covenants effective January 1, 2021. The Seventh Amendment to the Credit Facility dated April 26, 2021 (the "Seventh Amendment") provided for amortization of the loan on a 10-year straight-line basis commencing on November 15, 2021 and continuing until maturity on October 15, 2022. Interest on the Credit Facility is fixed at 8.25%. Interest on the first 5.25% is calculated monthly and paid in arrears, while the remaining 3.00% is accrued to the loan balance through October 15, 2022, and due with all remaining outstanding principal on the maturity date. Additionally, the Credit Facility is subject to an unused credit line fee of 0.5% per annum multiplied by the amount by which total availability exceeds the average monthly balance of the Credit Facility, payable monthly in arrears. The Credit Facility is collateralized by substantially all our assets and subject to financial covenants.

On February 11, 2021, the Company made a $3.0 million payment of principal on the equipment term loan. As of June 30, 2021, we had an outstanding principal loan balance under the Credit Facility of approximately $14.0 million with a weighted average interest rates of 8.25% per year. As of June 30, 2021, our availability under the 2017 Amended Credit Agreement was $1.0 million. The Credit Facility balance of $15.0 million at June 30, 2021 includes $1.0 million of future interest payable due over the remaining term of the Credit Facility in accordance with ASC 470-60, Troubled Debt Restructuring by Debtors.

Under the  2017 Amended Credit Agreement, we are subject to the following financial covenants, with which we were in compliance as of June 30, 2021:

(1)  On December 31, 2020, we were required to maintain liquidity of not less than $1.5 million; and

(2)  For each trailing three-month period, commencing with the three-month period ending March 31, 2021, we are required to achieve gross revenue of at least seventy percent (70%) of our projected gross revenue; and

( 3)  We are limited to a capital expenditures cap of $1.2 million for any fiscal year that the loan remains outstanding.

In connection with amending the 2017 Amended Credit Agreement on September 23, 2020, the Company issued to East West Bank 533,334 shares of Company common stock, and a five-year warrant to purchase up to 1,000,000 additional shares of Company common stock at an exercise price of $3.75 per share. The 533,334 shares of Company common stock were valued at a price of $2.0775 per share, or a total value of $1.1 million. The 533,334 common shares issued to East West Bank could not be sold or transferred prior to March 23, 2021. The warrant for 1,000,000 shares is exercisable beginning September 23, 2021 until September 23, 2025. The fair value of the warrant was determined to be $1.4 million and were recorded in additional paid-in capital. The Company recorded a total gain on the debt restructuring of $11.9 million during the third quarter of 2020, which was calculated by subtracting from the $16.0 million loan forgiveness, a) the future interest payable on the Credit Facility; b) the value of the Company common stock issued; and c) the fair value of the warrant.

Debt Issuance Costs

We capitalized certain debt issuance costs incurred in connection with the Credit Facility discussed above and these costs were amortized to interest expense over the term of the facility on a straight-line basis. There were no remaining unamortized debt issuance costs as of June 30, 2021 and December 31, 2020. During the three and six months ended June 30, 2020, the Company amortized approximately $24,000 and $58,000, respectively, of these costs to Interest Expense. 

Paycheck Protection Program

On April 10, 2020, the Company, entered into a promissory note (the “Note”) with East West Bank in the aggregate amount of $1,939,900, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020, and is administered by the United States Small Business Administration ("SBA").

On November 9, 2020, the Company submitted the initial loan forgiveness application to East West Bank for review and approval. On July 8, 2021, the SBA approved our loan forgiveness application in full, which includes forgiveness of the total principal balance of $1.9 million, as well as approximately $24,000 in accrued interest. The total amount forgiven will be recorded in other income (expense) during the third quarter of 2021.

Notes Payable

Long-term debt consists of the following (in thousands):

	June 30,				December 31,
	2021				2020
Senior Revolving Credit Facility with related party. All future interest through October 15, 2021 accrued to loan pursuant to the Fifth Amendment. Interest at 8.25%, 5.25% is paid monthly while 3% is accrued and paid upon maturity. Amortization of the loan on a 10-year straight-line basis will commence on November 15, 2021. Matures October 15, 2022.	$	14,980		$		19,078
Paycheck Protection Loan. Interest is at 1% with payments deferred until October 10, 2020. Matures April 10, 2022. Loan and accrued interest forgiven in full on July 8, 2021.		1,940				1,940
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Balance converted to equity in February 2021.		-				1,250
Real Estate Loan for a facility in North Dakota, interest at 5.75%, and monthly principal and interest payment of $5,255 until October 3, 2023. Collateralized by land and property purchased with the loan.		139				167
Vehicle loans for three pickups, interest at 8.59% monthly principal and interest payments of $3,966. Loans paid in full in June 2021.		-				31
Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service (“IRS”) in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS. Loan paid in full in June 2021.		-				14
Total		17,059				22,480
Less debt discount		-				(70	)
Less current portion		(1,720	)			(1,693	)
Long-term debt, net of debt discount and current portion	$	15,339			$	20,717

Aggregate maturities of debt are as follows (in thousands):

Twelve Months Ending June 30,
2022	$	1,720
2023		15,316
2024		23
Thereafter		-
Total	$	17,059